Beginning inventory, purchases, and sales data for portable DVD players are as follows:

$$\begin{array}{rllll} \text{April 1}&&\text{Inventory }&&\text{120 units at \$39}\\ \text{6}&&\text{Sale}&&\text{\hspace{5pt}90 units}\\ \text{14}&&\text{Purchase }&&\text{140 units at \$40}\\ \text{19}&&\text{Sale }&&\text{110 units}\\ \text{25}&&\text{Sale }&&\text{\hspace{5pt}45 units}\\ \text{30}&&\text{Purchase }&&\text{160 units at \$43}\\ \end{array}$$

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Meredith’s Appliance Store has the following data for the items in its inventory at the end of the accounting period:

$$\begin{array}{lcccc} \text { Item } & \begin{array}{c} \text { Number } \\ \text { of Units } \end{array} & \begin{array}{c} \text { Historical } \\ \text { Cost per Unit } \end{array} & \begin{array}{c} \text { Selling Price } \\ \text { per Unit } \end{array} & \begin{array}{c} \text { Disposal } \\ \text { Costs } \end{array} \\ \hline \text { Window air conditioner } & 25 & \$ 180 & \$ 150 & \$ 45 \\ \text { Dishwasher } & 22 & 225 & 230 & 20 \\ \text { Refrigerator } & 35 & 420 & 450 & 25 \\ \text { Microwave } & 15 & 220 & 190 & 15 \\ \text { Washer (clothing) } & 28 & 180 & 260 & 40 \\ \text { Dryer (clothing) } & 18 & 210 & 275 & 50 \end{array}$$

Required:

Prepare the journal entry required to value the inventory at lower of cost or market.

Crandall Distributors uses a perpetual inventory system and has the following data available for inventory, purchases, and sales for a recent year:

$$\begin{array}{lccc} &&\textbf{Purchase Price}&\textbf{Sale Price}\\ \textbf{Activity}&\textbf{Units}&\textbf{(per unit)}&\textbf{(per unit)}\\\hline \text{Beginning inventory}&110&\$7.10\\ \text{Purchase 1, Jan. 18}&575&~~7.20\\ \text{Sale 1}&380&&\$12.00\\ \text{Sale 2}&225&&~~12.00\\ \text{Purchase 2, Mar. 10}&680&~~7.50\\ \text{Sale 3}&270&&~~12.00\\ \text{Sale 4}&290&&~~12.50\\ \text{Purchase 3, Sept. 30}&230&~~7.70\\ \text{Sale 5}&240&&~~12.50\\ \end{array}$$

Required:

1. Compute the cost of ending inventory and the cost of goods sold using the specific identification method. Assume the ending inventory is made up of 40 units from beginning inventory, 30 units from Purchase 1, 80 units from Purchase 2, and 40 units from Purchase 3.

2. Compute the cost of ending inventory and cost of goods sold using the FIFO inventory costing method.

3. Compute the cost of ending inventory and cost of goods sold using the LIFO inventory costing method.

4. Compute the cost of ending inventory and cost of goods sold using the average cost inventory costing method. (Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)

5. Compare the ending inventory and cost of goods sold computed under all four methods. What can you conclude about the effects of the inventory costing methods on the balance sheet and the income statement?

Tyler Company has the following information related to purchases and sales of one of its inventory items.

$$\begin{array}{rlcc} \textbf{Date}&\textbf{Description}&\textbf{Units Purchased at Cost}&\textbf{Units Sold at Retail}\\\hline \text{Sept. 1}&\text{Beginning inventory}&\text{20 units @ \$5}\\ 10&\text{Purchase}&\text{30 units @ \$8}\\ 20&\text{Sales}&&\text{40 units @ \$15}\\ 25&\text{Purchase}&\text{25 units @ \$10}\\ \end{array}$$

Refer to the information for Tyler Company above and assume the company uses a perpetual inventory system.

Required:

Calculate ending inventory and cost of goods sold using the FIFO, LIFO, and average cost methods.

Beginning inventory, purchases, and sales for Item Foxtrot are as follows:

$$\begin{array}{rllll} \text{Mar. 1}&&\text{Inventory}&&\text{270 units at \$18}\\ \text{8}&&\text{Sale}&&\text{225 units}\\ \text{15}&&\text{Purchase }&&\text{375 units at \$20}\\ \text{27}&&\text{Sale }&&\text{240 units}\\ \end{array}$$

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on March 27 and (b) the inventory on March 31.

Beginning inventory, purchases, and sales for Item Echo are as follows:

$$\begin{array}{rllll} \text{June 1}&&\text{Inventory}&&\text{100 units at \$50}\\ \text{4}&&\text{Sale}&&\text{\hspace{5pt}80 units}\\ \text{23}&&\text{Purchase }&&\text{125 units at \$60}\\ \text{26}&&\text{Sale }&&\text{\hspace{5pt}90 units}\\ \end{array}$$

Assuming a perpetual inventory system and using the last-in, first-out (LIFO) method, determine (a) the cost of merchandise sold on June 26 and (b) the inventory on June 30.

Beginning inventory, purchases, and sales data for portable DVD players are as follows:

$$\begin{array}{rllll} \text{April 1}&&\text{Inventory }&&\text{120 units at \$39}\\ \text{6}&&\text{Sale}&&\text{\hspace{5pt}90 units}\\ \text{14}&&\text{Purchase }&&\text{140 units at \$40}\\ \text{19}&&\text{Sale }&&\text{110 units}\\ \text{25}&&\text{Sale }&&\text{\hspace{5pt}45 units}\\ \text{30}&&\text{Purchase }&&\text{160 units at \$43}\\ \end{array}$$

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the merchandise sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in the third exhibit shown in the chapter.

An exercise machine with an original price of $860 is on sale at 12% off. a. What is the discount amount? b. What is the exercise machine’s sale price?

Do the terms FIFO, LIFO, and weighted average refer to techniques used in determining quantities of the various classes of merchandise on hand? Explain.

The beginning inventory for Dunne Co. and data on purchases and sales for a three-month period are shown in the first problem.

Instructions

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in the fifth exhibit, using the weighted average cost method.
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
3. Determine the ending inventory cost on June 30, 2014.

The beginning inventory for RTE Office Supplies and data on purchases and sales for a three-month period are shown in the first problem.

Instructions

1. Record the inventory, purchases, and cost of merchandise sold data in a perpetual inventory record similar to the one illustrated in the fifth exhibit, using the weighted average cost method.
2. Determine the total sales, the total cost of merchandise sold, and the gross profit from sales for the period.
3. Determine the ending inventory cost as of August 31, 2014.

Write 42.8% as a decimal.

Raymond Company and Geeslin Company both use a perpetual inventory system. The following transactions occurred during the month of January:

Required:

Prepare the journal entries to record these transactions on the books of Raymond and Geeslin.

Golden Eagle Company began operations in 2014 by selling a single product. Data on purchases and sales for the year were as follows:

$$\begin{array}{lccc} \textbf{Purchases:}\\ {\textbf{Date}}&\textbf{Units Purchased}&\textbf{Unit Cost}&\textbf{Total Cost}\\\hline \text{April 6}&\$\hspace{5pt}31,000&\$\hspace{5pt}36.60&\$\hspace{5pt}1,134,600\\ \text{May 18}&33,000&39.00&1,287,000\\ \text{June 6}&40,000&39.60&1,584,000\\ \text{July 10}&40,000&42.00&1,680,000\\ \text{August 10}&27,200&42.75&1,162,800\\ \text{October 25}&12,800&43.50&556,800\\ \text{November 4}&8,000&44.85&358,800\\ \text{December 10}&\underline{\hspace{10pt}8,000}&{48.00}&\underline{\hspace{15pt}384,000}\\ \text{}&\underline{\underline{200,000}}&&\underline{\underline{\$\hspace{5pt}8,148,000}}\\ \end{array}$$

$$\begin{array}{ll} \textbf{Sales:}\\ \text{April}&\hspace{30pt}16,000\hspace{5pt}\text{units}\\ \text{May}&{\hspace{30pt}16,000}\\ \text{June}&{\hspace{30pt}20,000}\\ \text{July}&{\hspace{30pt}24,000}\\ \text{August}&{\hspace{30pt}28,000}\\ \text{September}&{\hspace{30pt}28,000}\\ \text{October}&{\hspace{30pt}18,000}\\ \text{November}&{\hspace{30pt}10,000}\\ \text{December}&\hspace{5pt}\underline{\hspace{30pt}8,000}\\ \text{Total units}&\hspace{5pt}\underline{\underline{\hspace{20pt}168,000}}\\ \text{Total sales}&\hspace{5pt}\underline{\underline{\$10,000,000}}\\ \end{array}$$

On January 4, 2015, the president of the company, Connie Kilmer, asked for your advice on costing the 32,000-unit physical inventory that was taken on December 31, 2014. Moreover, since the firm plans to expand its product line, she asked for your advice on the use of a perpetual inventory system in the future.

1. Determine the cost of the December 31, 2014, inventory under the periodic system, using the (a) first-in, first-out method, (b) last-in, first-out method, and (c) weighted average cost method.
2. Determine the gross profit for the year under each of the three methods in (1).
3. a. Explain varying viewpoints why each of the three inventory costing methods may best reflect the results of operations for 2014. b. Which of the three inventory costing methods may best reflect the replacement cost of the inventory on the balance sheet as of December 31, 2014? c. Which inventory costing method would you choose to use for income tax purposes? Why? d. Discuss the advantages and disadvantages of using a perpetual inventory system. From the data presented in this case, is there any indication of the adequacy of inventory levels during the year?